Access to housing finance by urban middle - low income salary earners in Kampala City, Uganda

This research is about understanding the housing finance paradox in Uganda where the financial institutions claim that they have funds to support salary earners to acquire or construct their personal houses on the one hand and on the other hand a number of salary earners who claim that they cannot access housing finance to construct or acquire their personal houses. The main objective of the research was to establish the cause of the current level of access to housing finance by those who meet the crucial condition (regular monthly income) for accessing housing finance in Kampala city. It's the ultimate aim of most adult Ugandans to own their personal houses. However the cost of acquiring or constructing a house are so high that it may take some of them beyond 20 years before saving enough money to acquire one. In order to meet the objective without taking too long, most scholars and practitioners agree that borrowing may be the best way forward. In Uganda it's only a small proportion of the population that can meet the requirements for borrowing from the financial institutions partly due to the low incomes and also because financial institutions ignore the general economic conditions in designing their credit systems. This study is about the proportion of the population that would otherwise qualify to acquire loans and ascertain the reason for their obtaining or failure to obtain finance despite meeting the requirements. In order to do this, desk review of the available literature especially in the legal framework governing the financial institutions was undertaken. In addition to this, a survey using questionnaire was administered to a representative sample of those who are employed and earn the minimum amount required by banks in order to qualify for borrowing as well as conducting interviews with some of the financial institutions in Kampala city. The study revealed that high interest rates, unfavourable housing finance products, limited information on the available housing products, complex loan approval process, the complexity of obtaining both a land title and a building plan approval are the major obstacles towards obtaining housing finance by the target population. The study identifies the following as some of the ways in which access to housing finance can be improved in Uganda: Creation of various housing finance products that are customised to accommodate various categories of clients, creation of a mortgage indemnity fund to reduce on the risk faced by financial institutions and hence lower interest rates and creation of a guarantee fund by Government as the ultimate safety net in case clients default on their mortgage payments and the indemnity fund is unable to cover the payments. Keywords: Housing, Housing finance, Middle-low salary earners, financial institutions, Uganda